Concern over with-profits life arms threaten smaller mutuals
The Financial Services Authority (FSA) is demanding mutual insurers prove they have a viable future amid concerns over declining sales, The Times reports.
A recent letter sent by Jon Pain, the FSA’s managing director of supervision to the chief executives of Britain’s 57 mutual insurers and friendly societies suggested that some societies should consider winding themselves up.
Aimed at those with “with-profits” life arms, the letter said: “If a mutual is unable to continue to effect new business on terms which also enable the existing with-profits business to run off fairly, it may be required to close to all new business.”
Biggest are safe
The biggest mutual societies, such as Royal London and LV, are not expected to have any difficulty complying, the Times said.
The Association of Financial Mutuals said: “We are disappointed with the approach the FSA is taking but we’re keen to work with them towards a reasonable outcome.
“The whole issue of making sure firms have a viable future is not a new one — it’s something we’ve all been working on for a number of years.”
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